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April 5, 2007

Alberta's growth slowing

EDMONTON

The most recent ATB Financial Business Sentiments Index indicates a slowdown in the momentum of growth for businesses in Alberta.

“We are seeing a tempering in business optimism across most sectors, particularly in oil and gas,” says Dr. Bob Ascah, vice president at ATB Financial. “With the exception of manufacturing, year over year results show a decline in the Index, although there are seasonal factors contributing to that deceleration.”

For the second quarter of 2007, the Business Sentiments Index is 140.3, virtually the same level as the 2007 first quarter Index of 140.2. Anticipated growth has declined somewhat compared to 2006 results. This stabilization shows a general slowing in momentum.

According to the Index of Hiring Intentions, which provides information on jobs created, Alberta businesses continue to face challenges in finding employees. At 131, the index shows there is little change from the first quarter of this year but a decline from 2006 levels.

“While there is moderation compared to 2006, labour shortage is still a pressing matter for businesses,” says Ascah. “The sectors facing the most challenges are construction, manufacturing, and wholesaling.”

This quarter, for the first time, businesses were asked to describe their phase of development. Just under 87 per cent of the sample assess their position as one of “considerable growth” or of “stability and holding market position.” Other descriptions include: a beginning or start-up phase, ready to transfer to a new owner or successor and winding down or reducing the size of operations.

Has the Alberta economy been overheated?

“You bet it has,” says Dr. Ted Chambers, Research Professor, Western Centre for Economic Research, University of Alberta. “One very good indicator of the pressures on the capacity of the economy is the rate of increase in full time jobs. Over the past 24 months these accelerated to a rate 2 1/2 times the long-term average with all of the difficulties that creates for productivity, infrastructures, housing and a range of public services. Our results suggest that growth is now reverting to healthier and more sustainable levels.”

“Now that we can compare data on a year-over-year basis, we can begin to identify patterns that may relate to seasonal phenomena and other factors,” continues Dr. Ted Chambers. “Our results continue to be consistent with other research.”

The survey assesses activity in the economy by responses about sales experience during the prior quarter.

The Activity Index, at 128 for the first quarter of 2007, indicates a significant deceleration from the average 2006 level of 143. Since the inception of the survey, the comparison of actual activity against the sentiment for the period shows a tendency for the Business Sentiments Index to exceed the Activity Index.

“This can be attributed to the generally optimistic outlook of Alberta business people and to the difficulty of achieving targets in and environment of labour and skills shortages,” says Dr. Chambers.

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